October 15, 2025 • 28 mins
Few economies are as closely watched in this region right now as New Zealand’s as it navigates inflation pressures, productivity challenges and a shifting global environment.
In this special bonus episode, Wellington Bureau Chief Matthew Brockett interviews New Zealand Finance Minister Nicola Willis live on stage for the Bloomberg Address in Auckland on Oct. 10. Now in its fifth year, the annual event has become a cornerstone of New Zealand’s policy calendar.
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Episode Transcript
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Speaker 1 (00:02):
Hello, Rebecca Jones here or should I say key order,
because you're about to hear a special bonus episode recorded
live in Auckland, New Zealand, earlier this month. And yes,
I know this is the Australia Podcast, but few economies
are as closely watched right now in this region as
New Zealand's. Our Pacific neighbor is navigating inflationary pressures, productivity
(00:24):
challenges and a shifting global environment, which is why the
conversation you're about to hear is such a timely one.
New Zealand's Minister for Finance and Deputy Leader of the
National Party, Nikola Willis, was interviewed live on stage before
a pack to room by our Wellington Bearer chief Matthew Brockett.
Here's what you had to say.
Speaker 2 (00:45):
I want to just reflect quickly on where we are
right now in the economic landscape. The economy is smaller
than it was when you took office. That's a tough
metric to confront for a government that claims to be
a better economic manager than its predecessor. What do you
think's gone wrong?
Speaker 3 (01:00):
Well, I think that it will have gone right by
next year, Matthew. And that's when the voters decide and
look when yesterday I shared with Parliament. But the IMF
has done an assessment of the output gap in various
countries around the world in twenty twenty three and what
that analysis shows is that New Zealand was top of
the pops, which is to say, in twenty twenty three
(01:21):
when the last government left office, we had the most
overheated economy in the world, and that was off the
back of three years of inflation out of band, an
extremely rapid rise and interest rates and you know, a
Reserve Bank governor who was pretty upfront about saying he
was trying to engineer a recession. So I don't think
there should be any surprise about the fact that we
(01:42):
have had a downturn and a difficult recovery that was anticipated.
Our job as a government is to reset the foundation
so that growth can return in a sustainable way. Part
of that is getting the books back in healthy condition.
Part of that is putting in place the reforms that
will drive future growth. And when it comes to the
fundamentals inflation back and band, interest rates coming down, we're there.
(02:07):
As I say, we've had some growth returning, we want
to see that sustained all of my forecasters tell me
I should be confident.
Speaker 2 (02:14):
You spoke about the NOx for confidence from the US tariffs,
But I just wonder why New Zealand's confidence was not
that much, I mean a lot more than other comparable countries.
Does the government not have a role in ensuring up
confidence and then in times of that sort of global uncertainty, Well.
Speaker 3 (02:31):
Look, I mean this is its sentiment is notoriously hard
to judge and assess. My view is that we had
only just come into our recovery. As I say, our
cyclical recovery post COVID has been marked by more challenges
because our inflation lasted longer and went higher than in
many other countries. Our interest rates also spiked higher. There
(02:53):
are a number of factors that mean New Zealand's recovery
has been more challenging, and off the back of that
and the confidence that that ad sapped with confidence only
just returning my basic sense, it didn't take much of
a blow for people to go back into their box.
And I think that that was the sort of behavior
that you saw. We're also, you know, one of the
(03:14):
world's great trading nations. One and four jobs in this
country depends on trade. We're not like some countries who
actually do most of their economic activity with themselves. We're
highly dependent on access to global markets. And the idea
of a US China trade raw or I think everyone
in New Zealand knows that that's not great for our country.
Speaker 2 (03:34):
Okay, I think you alluded in your speech to the
idea that potentially that zero point nine percent contraction could
be revised, presumably to something a bit smaller. What advice
have you had from Treasury around that.
Speaker 3 (03:47):
Yeah, just simply that they've pointed out to me that
over the past couple of years or so, it has
become very regular for Stats n Z to revise it's
quarterly GDP data, and you can look back on that
and see that some of those revisions have been reasonably significant.
To defend STATS that has actually occurred around the world
(04:08):
to some extent that getting back to seasonal patterns post
COVID and measuring that STATS data is challenging, and you've
seen a number of jurisdictions find that survey techniques are
having to evolve. So I don't think STATS in Z
is unusual in that sense, but we certainly have seen
significant revisions to the quarterly data. There are some technical
(04:28):
factors which I'm not even sure this audience would be
up for understanding, but to deal with the top down
adjustment and the seasonality of the Q two quarter versus
the Q four data, and Treasury of brief me on
those things and said, look, taken together, all you need
to know is don't be surprised if there is a
revision to this, and the Reserve Band clearly pointed to
that in their statement yesterday as well.
Speaker 2 (04:47):
Do you want to take a stab at what it
might be revised?
Speaker 3 (04:48):
No, I don't want to do that.
Speaker 2 (04:51):
You're saying now that the worst is behind us. I
just want to quickly touch on the NZIARS Business Business
survey that came out this week, because that was quite downbeat. Notably,
investment intentions were sharply lower, and that thirteen percent of
firms expecting to reduce spending on plant and machinery over
the coming year. And that must be a bit of
(05:11):
a concern, particularly after your investment boost in this year's budget.
Speaker 3 (05:15):
Yeah. Look, we've always said that investment boost is a
policy for the medium and long term. It's not a
stimulus response. We don't think the fiscal stimulus is required
from the government at this juncture. The Reserve Bank is
doing the lifting on stimulus, but it's actually about the
productivity settings, and so firms know it's there and are
(05:38):
going to be able to take it up. And on
the margin, we do expect it will bring some investment
decisions over the line that wouldn't have otherwise happened. You know,
the NZIR survey you refer to is interesting and that
it's not as exposed to agriculture as some of the
other surveys, and I think that is significant because we
are very much seeing that the agricultural part of the
economy is doing very well. That is where you are
(06:01):
seeing not only good returns, but certainly for the dairy sector,
they're looking ahead potentially to an additional dividend next year,
and you're seeing a sense that those returns will be
sustained across large parts of the agricultural sector with the
highest terms of trade we've had since the fifties, So
that means that you are seeing different things happening in
(06:21):
different parts of the economy. That survey isn't picking up
on the egg and I think if it was, it
would paint a more positive picture. Equally, the own activity
measures in that survey show that people's reported actual activity
is getting better.
Speaker 2 (06:34):
Okay, you mentioned stimulus there briefly. Of course, we do
have an election next year. You're going to want the
economy to be growing by then. Are you planning any
specific stimulus measures going into the next year.
Speaker 3 (06:46):
No, we're going to stick to our fiscal plan because
we were elected very clearly on a platform that after
some years of what we would characterize as very reckless
economic and fiscal management, which allowed debt to soar in
a way that was quite unprecedented and allowed a structural
(07:06):
deficit to be put in place, with spending reaching very
high levels in a wasteful way. That part of what
we were elected to do was re was reset those
foundations to have fiscal responsibility back, to get the books
back in balance, and so that's part of our handshake
with the New Zealand people. And to do that, we've
(07:27):
got to stick to the fiscal strategy and we're confident
that we can do that while continuing to invest in
the public services, which we've also committed to do a
better job on, whether that's in health or education, our police,
and we've demonstrated that we can do that. Over the
past two budgets by delivering forty three billion dollars of
savings from less efficient parts of the crown, we have
(07:50):
been able to then release investment to education, to health,
to other critical areas, and it will be the same
in next year's budget.
Speaker 2 (07:58):
Well, you are constrained by the fiscal situation. The budget
deficit is forecastill widened to twelve billion in the current year.
That's two point six percent of GDP. Do you still
expect to be able to return the budget to surplus
in twenty twenty.
Speaker 3 (08:12):
Eight, Yes, yes, we do. We continue to have that
intention that it continues to be our fiscal goal. How
that will actually play out will fluctuate over a series
of forecasts. But what we've set out in our budget
plan is a gradual consolidation path. And all of the
advice that I've received is, well, yeah, in a technical sense,
(08:36):
you could suddenly just rip a whole hecker spending out
and get yourself back into balance immediately. Actually, the way
that you would have to do that would probably be
through transfers, that is, social welfare support or superannuation support,
because that's where the bulk of adjustable spending lies, and
when you do that in one fowl swoop, that can
actually have extremely negative impacts on both economic growth and
(08:59):
economic center. Not to mention the fact we don't have
a mandate for that from the people who elected us,
so I don't think that would be the right thing
to do. And we have set out confidently that we
can achieve fiscal consolidation over the medium term consistent with
what the experts tell us as needed. And look, you know,
the best way of reviewing whether I'm telling the truth
(09:20):
there is the ratings agencies, and they retain confidence in
our plan. They think that this remains a good credit
risk of a country. They've rated us highly and say,
as long as we stick to that plan, we're all good.
Speaker 2 (09:31):
Of course, the ratings agency is also like you as
subprime debt. But let's move on to net debt.
Speaker 3 (09:38):
There's a cheery chat.
Speaker 2 (09:42):
I just want to briefly touch on debt. It's currently
about forty two percent of GDP. You want to reduce
it to less than forty percent. It's forecast increased to
forty six percent in the next couple of years. Those
are historically high numbers, and the Treasury is warning that
it'll keep rising, going to two hundred percent of GDP
by twenty sixty five, unless something's done to address the
(10:05):
pressures of the aging population. And I wonder what you
see as being necessary to stop that from happening.
Speaker 3 (10:12):
First, I just want to address a few things in
your question slash speech. The first of all, the debt
is forecast to grow and before it comes back down
at the end of the forecast period, before we bend
it down. But it is of note I think that
when we saw the full accounts for the year which
we published yesterday, we were forecasting and increased to debt,
(10:33):
but actually debt held level. My point here is, yes,
we're forecasting that, but we're always aiming to do better.
The second thing is you're absolutely right that Treasury have
said very clearly that anything above fifty percent debt in
New Zealand, due to our small, exposed nature and the
price we already pay for debt, would expose us if
(10:54):
we were to have any kind of a shock, and
would not be a prudent place to be. And we
accept their advice on that and think that it is
important to get back into a more prudent debt position
as we look ahead Treasury have done there. Forty years
from now, if nothing changes, if no government decides to
do anything differently, what might happen. And frankly, I just
(11:15):
think that's a theoretical exercise that has no bearing on reality,
because governments have proven that they do react to the
circumstances in front of them. You know a couple of
key issues for New Zealand superannuation and health, and those
are the two areas that are going to drive future
public expenditure. I think all parties have a requirement to
(11:40):
go into the next election with a policy setting out
where they're at on superannuation, because as we all know,
these are very long held things and we need to
signal very clearly, very much ahead of people who aren't
even thinking about retiring now, what those settings will look like.
We as a part have proposed changes in this area
(12:02):
in the past. We haven't committed to whether we would
make changes in the future, but I think we have
shown our hand at this recent budget by increasing those
contributions to key we savor, which shows a commitment I
think from all three parties in the coalition that that
is an important vehicle for New Zealand's future savings.
Speaker 2 (12:22):
What about new revenue streams. It's something which Treasury is
also highlighted. Do you see a need for any new
revenue streams?
Speaker 3 (12:29):
It was interesting. We recently had a tax expert visit
New Zealand and I had him come into my office
and I said, well, how do we look relative for
the rest of the world, And he said, like, you're
really good. You've got a really great system in that
you're a posed to child for having resisted the political
urge to fiddle with your GST. It's very clean. You
haven't introduced exemptions and problems like that. It works, is
(12:52):
a really efficient revenue system. Your paye system looks pretty good.
You've got the corporate system looking pretty good. It works
pretty well. It's a clean system, and so our viewers
when you look at when you look at the tech system,
you want it to be efficient. You don't want it
to seem distorting signals. You want it to raise sufficient revenue.
(13:15):
But we will always be looking at it to say
we'll given our goal is to be more competitive internationally,
Given our goal as for New Zealanders to get ahead
and to pursue aspiration and achievement, we should be continuously
asking ourselves. Could these settings better support that?
Speaker 1 (13:30):
We'll be right back for part two of New Zealand
Finance Minister Nicola Willis in conversation with Bloomberg's Matthew Brocket.
This is the Bloomberg Australia Podcast and welcome back to
the Bloomberg Australia Podcast. You're listening to an extract of
Wellington Bureau Chief Matthew Brockett in conversation with New Zealand
(13:52):
Finance Minister Nicola Willis, recorded before a live audience in
Auckland earlier this month.
Speaker 3 (13:58):
What about a capital gains text that's never been on
our agenda?
Speaker 2 (14:02):
But I mean, why not when New Zealand is an
outlier in the OECT and not having one.
Speaker 3 (14:08):
Well, the first reason why not is the parties that
want to raise a capital gains tax will also want
to waste the money on something else. And typically we've
seen that labor governments that have spent more have not
put that spending into productive investment. We've seen it in
fact been used in a wasteful way. But the second
(14:29):
reason is that capital gains taxes very clearly send a
message that those who invest in capital and gain from
capital will be punished for it, and we're sending a
really strong message we actually want more investment in New Zealand,
we actually want more capital growth to occur. And it's
very hard for me to reconcile how you say, on
the one hand, we're going to tax returns on capital,
(14:51):
but on the other hand, we really want you invest
in capital and making greater returns on capital. So it's
just not consistent with our worldview, which is, let's make
this a better place to vent best, not make it harder.
Speaker 2 (15:01):
Well, I'll just push back on that just a little bit.
I mean, there's no strong evidence that taxing capital gains
actually drives capital away. And I mean, if everyone else
has got a capital gains text, then where's it going
to go?
Speaker 3 (15:13):
And well, it gives them another reason to go. And
you know, I'm very reflective about this, which is we've
got this big brother over there called Australia, and we
have very free flows of people in capital between New
Zealand and Australia. And our advantages are not absolute. We
have many It's a much better place to live here.
(15:33):
But one of the things that does matter is things
like Australia has a capital tax, a capital gains regime
and we don't and on the margin, yes, that's of
advantage to us. Do we want to keep giving away
every single area of advantage that we have? My answer
is known.
Speaker 2 (15:49):
Okay, As we're on the housing market broadly, you know,
I just want to ask for your views on this
because it plays an important part in terms of economic
growth and the wealth effect, which we're currently not having
at the moment. Your colleague christ Bishop is on record
as saying he wants house prices to fall, and they
have been falling, but that makes your job harder. What
(16:11):
would you like to see in the housing market.
Speaker 3 (16:13):
Well, I want to see a much more moderate house
price growth than we have seen in the past. So
there's two issues. The first issue is that we saw
a massive spike in house prices in New Zealand post COVID,
essentially a thirty percent house price growth in one year.
And then we've basically seen an asset bubble crash, which
(16:36):
is that that's come off the other side, and of
course that's at a huge knock to household confidence and
has really been a kick in the guts for many
New Zealanders. So I think that has absolutely affected the
recovery that we're having what we want to see, and indeed,
what Treasury is forecasting is that in the future there
(16:58):
will be moderate house price growth, but in a system
that allows supply to respond to demand, because historically what
we've seen in New Zealand is periods of extremely high
house price growth simply because demand was higher for housing,
but the market was completely unable to respond on the
supply side. Why because our resource consent settings didn't allow
(17:22):
developers to get the consent for the developments they might
have wanted to do, so they could see the signal
in the market house prices are going up high. Let's
get in there and build some houses to respond to that.
But there was a huge timing delay between the markets
showing that and then being able to respond with supply.
So we're changing the settings. And what Chris Bishop is
intent on is you want for the market to work
(17:42):
so that if we are seeing spikes and demand, people
can get out and supply the housing. But both he
and I agree we're going to see moderate house price
growth in the future.
Speaker 2 (17:50):
Okay, let's move on to the Reserve Bank, which has
been dominating headlines this year for all kinds of reasons. Firstly,
do you think it made the policy mistake? I mean
it paused and its rat cuts earlier this year and
now it's cutting by fifty basis points. Did they fail
to recognize that the economy was in a hole?
Speaker 3 (18:08):
Well, I have the good grace not to comment on
whether or not they have succeeded or failed, and in
return they have the good grace to do the same
for me.
Speaker 2 (18:15):
Okay, you've appointed a new Reserve Bank Governor. Anna Breman,
currently Deputy governor of Sweden's Rix Bank, will be the
first woman to help in the RBNZ. Now, I know
you said that gender wasn't a consideration in that appointment,
but I wonder how important it was for you to
break that glass ceiling.
Speaker 3 (18:35):
Well, I think it's significant for New Zealand having been
appointed to a role where there's only been another woman previously.
I know that it's very undermining if people suggest that
the reason you're in that role is because of your gender,
and I did not want that for doctor Breman. At
(18:55):
the point of her appointment that was very important to me.
She is absolutely there on her merits. She has a
CV from Central Banking, Central Casting, and she's an extraordinarily
impressive person. But there is just no question when our daughters,
but actually when women across the country see that there
(19:17):
is no office in this country that cannot be occupied
by a woman that has a galvanizing and positive effect.
Speaker 2 (19:24):
In her initial remarks, Breeman spoke about enhancing transparency at
the RBNZ. The Ricks Bank is more progressive on that
front than our central Bank in terms of things like
attributing votes to members of the rate sitting committee, holding
a press conference after each rate decision, and so on.
I wonder if you see her appointment as an opportunity
(19:45):
to introduce transparence transparency reforms.
Speaker 3 (19:48):
Great question, and the answer is yes, yes, yes.
Speaker 2 (19:50):
Okay, what kind of reforms meant? Would we you, for example,
favor that votes being attributed on the Military Policy Committee?
Speaker 3 (19:59):
Well, look, I'm going to leave it until doctor Brahman
has actually formally commenced her role and is able to
have those discussions with her own board, and then I
will have those discussions with them about where we take that,
because obviously those are decisions that we will consider together.
But both me and doctor Braman independently have said that
we think central banks should be committed to public transparency
(20:23):
and accountability because it builds trust and that is actually
essential to the way in which central banks operate. And
where we have a choice in the settings that we
think ultimately will build trust and build accountability, then I
think we are duty bound to consider those changes. So
there are always trade offs and balances to be made,
(20:44):
and so all of these things need to be considered carefully.
But as you point out, there are monetary policy regimes
around the world which are radically more transparent than ours.
Ours is still at the transparent end of the spectrum,
but of course there's other improvements we could make.
Speaker 2 (20:58):
But just to be clear, would you support the attribution
of votes on the MPC.
Speaker 3 (21:04):
Well, as I say, I'm not going to make a
judgment on that until doctor Breman, together with her board,
have had an opportunity to consider it. But I do
think it's been very positive actually to have the record
of split votes over recent OCR decisions, because it just
informs the market better about what's happening. But I also
think it's healthy that you get the odd split decision
(21:25):
on the MPC because what it demonstrates is they are
having robust debates around that table and are seeing the
balance things. It's not group think, it's not one person
deciding and telling the others what to think. That there
is a range of views being shared and being brought
to the table. I think that is actually a healthy
thing and not to be feared.
Speaker 2 (21:43):
Since its formation in twenty nineteen, the MPC, we've seen
external members join that and they've been almost completely invisible.
I mean I can count on one hand the number
of times they've engaged publicly or with the media. Is
that acceptable? Do you think that there should be a
bit more accountability there? I mean, these are people designing
on interest rates that affect the whole country.
Speaker 3 (22:04):
Ah well, look, there's nothing to stop them from doing that.
There's nothing preventing them from doing that. And I think
the reality is that the that the MPC speaks via
its statements, and there's always some desire not to confuse
the market with people out saying different things in between updates,
(22:25):
so that probably bears on some of their approach to it.
But there's absolutely nothing to stop them right now, but.
Speaker 2 (22:31):
They're not doing it. Yeah yeah, okay, what about just
just finally, what about a press conference after each rate decision?
As the Rick's Bank does I mean, would that be
something that you would be in favor of.
Speaker 3 (22:42):
Look, as I say these are all, there's actually a
laundry list of ideas that doctor Brayman and the Board
may wish to consider. I don't think our system is broken.
I think it actually works fairly well. Those who are
market participants tell me that they feel they get good
and clear information out of the official cash rate decisions,
(23:03):
and so I don't think that it's not working. But
if there are incremental improvements we can make, and there
are many we could consider, then we should. And each
of those will come with some some pros and some
cons and we'll need to weigh that up. I'll have
a view, the Treasury will have a view, that the
RB and Z will have a view, and together will
weigh that up. And I'll respect that process by waiting
(23:24):
until the right time.
Speaker 1 (23:25):
Okay.
Speaker 2 (23:26):
Just this week we saw news that the former governor
was paid a restraint of trade payment of over four
hundred thousand dollars. I mean, it's looked a bit untidy,
this whole saga, and I just wonder whether you've felt
that it's undermined the reputation of the Reserve Bank in
any way.
Speaker 3 (23:43):
Well, look, ultimately the chairperson of the Reserve Bank did resign,
and I think that ultimately reflected his decision, but also
our discussion that we wanted to protect the reputation of
the Reserve Bank. And I've made absolutely no bones about
the fact that I don't think they had managed that
episode well and that they should have been much more
(24:06):
open and transparent in the way that they handled questions
seeking information about that matter. I always sought very properly,
I think, to not have the role as the commentator
in chief on the employment agreement between the Governor and
the Board. I thought it was very dangerous for the
Minister to step into that dispute in any way, and
(24:30):
absolutely distanced myself from it, and then thought, having not
been a party to it, I must rely on the
Board to communicate about it, because otherwise I am inferring
and making inference and commentary on something which I'm not
actually a party too, that has all of the information
with bearing and so what that requires for it to
work is for the Reserve Bank to then communicate openly
(24:51):
and transparently, and unfortunately they haven't always met that mark.
Speaker 2 (24:55):
Okay, we are getting close to the time for the
Q and A. But I just wanted to finish out
USh with just a little bit of a conversation about
what it's like to have your job. You know, a
lot of people look at parliament and politics and think
that would be the last job they'd want to do.
You were extremely long hours, you face a lot of criticism,
and you know, just this week we've seen people throwing
(25:16):
rocks through politicans windows. What why do you want to
be in politics?
Speaker 3 (25:22):
Because I genuinely want to serve and make a difference.
I am one of those New Zealanders who has been
fortunate enough to get a great education, to have a
great mom and dad, to have the opportunities this country provides,
and I want to make sure that more people get that.
(25:46):
I want to make the country better. And I've also
got four kids and their age nine through fifteen, and
I worry that if New Zealand sits back and none
of us stand up to make the changes that are needed,
none of us stand up to say, let's actually make
sure the government works, none of us stand up and
say we actually need to change some things and make
(26:06):
some reforms and do better, then all my kids will say, well,
New Zealand's going backwards. I'm going to go and live
in London or Beijing or Singapore, and I'd quite like
to have Christmas here into the future. So I feel well,
I've had everything I could possibly wish for out of
this country. The least I can do is put my
shoulder to the wheel and help make it better.
Speaker 2 (26:28):
Okay, I'm not going to ask you if you want
Christopher Luxon's job, but if in the future the opportunity
arose for you to lead your party and become Prime Minister,
would you consider it.
Speaker 3 (26:41):
I am one hundred percent focused on being a good
finance Minister, a good economic growth minister, and delivering the
Social Investment Framework that I came to Parliament with an
absolute passion for, which is a whole nother speech and
a whole other forum. By the way, could you host
that one? Because that is a fascinating area of reform
that I don't talk enough about. And so my plate
(27:02):
is full. And I always say to people who are
coming to me saying should I run for Parliament? I
normally say yes, but I also say, but be really
clear in your head, why are you coming? Because if
you are coming with a sense of personal ego E
I want this role, then chances are you going to
be disappointed because there's a lot of factors outside of
(27:24):
your control. But actually you should be thinking what is
the service I want to offer, what is the impact
I want to have, and then seek opportunities to make it.
The reality is in this role, I have extraordinary opportunities
every day to have impact and make a difference, So
I could want for no more. I mean, it's extraordinary,
So I'll do this job to the absolute best of
(27:46):
my abilities.
Speaker 1 (27:47):
If you found today's conversation insight well, be sure to
follow the Bloomberg Australia Podcast wherever you listen and check
for more reading on the biggest issues facing New Zealand,
including the latest reporting from Matthew Brockett and his team.
Complete recording of this live event at Bloomberg dot com.
This episode was produced by Paul Allen, and our special
(28:08):
thanks go out to Jordan Mole, Josephine Dylan and Awson Ostop.
I'm Rebecca Jones and I'll see you next week.
Hello, Rebecca Jones here or should I say key order,
because you're about to hear a special bonus episode recorded
live in Auckland, New Zealand, earlier this month. And yes,
I know this is the Australia Podcast, but few economies
are as closely watched right now in this region as
New Zealand's. Our Pacific neighbor is navigating inflationary pressures, productivity
(00:24):
challenges and a shifting global environment, which is why the
conversation you're about to hear is such a timely one.
New Zealand's Minister for Finance and Deputy Leader of the
National Party, Nikola Willis, was interviewed live on stage before
a pack to room by our Wellington Bearer chief Matthew Brockett.
Here's what you had to say.
Speaker 2 (00:45):
I want to just reflect quickly on where we are
right now in the economic landscape. The economy is smaller
than it was when you took office. That's a tough
metric to confront for a government that claims to be
a better economic manager than its predecessor. What do you
think's gone wrong?
Speaker 3 (01:00):
Well, I think that it will have gone right by
next year, Matthew. And that's when the voters decide and
look when yesterday I shared with Parliament. But the IMF
has done an assessment of the output gap in various
countries around the world in twenty twenty three and what
that analysis shows is that New Zealand was top of
the pops, which is to say, in twenty twenty three
(01:21):
when the last government left office, we had the most
overheated economy in the world, and that was off the
back of three years of inflation out of band, an
extremely rapid rise and interest rates and you know, a
Reserve Bank governor who was pretty upfront about saying he
was trying to engineer a recession. So I don't think
there should be any surprise about the fact that we
(01:42):
have had a downturn and a difficult recovery that was anticipated.
Our job as a government is to reset the foundation
so that growth can return in a sustainable way. Part
of that is getting the books back in healthy condition.
Part of that is putting in place the reforms that
will drive future growth. And when it comes to the
fundamentals inflation back and band, interest rates coming down, we're there.
(02:07):
As I say, we've had some growth returning, we want
to see that sustained all of my forecasters tell me
I should be confident.
Speaker 2 (02:14):
You spoke about the NOx for confidence from the US tariffs,
But I just wonder why New Zealand's confidence was not
that much, I mean a lot more than other comparable countries.
Does the government not have a role in ensuring up
confidence and then in times of that sort of global uncertainty, Well.
Speaker 3 (02:31):
Look, I mean this is its sentiment is notoriously hard
to judge and assess. My view is that we had
only just come into our recovery. As I say, our
cyclical recovery post COVID has been marked by more challenges
because our inflation lasted longer and went higher than in
many other countries. Our interest rates also spiked higher. There
(02:53):
are a number of factors that mean New Zealand's recovery
has been more challenging, and off the back of that
and the confidence that that ad sapped with confidence only
just returning my basic sense, it didn't take much of
a blow for people to go back into their box.
And I think that that was the sort of behavior
that you saw. We're also, you know, one of the
(03:14):
world's great trading nations. One and four jobs in this
country depends on trade. We're not like some countries who
actually do most of their economic activity with themselves. We're
highly dependent on access to global markets. And the idea
of a US China trade raw or I think everyone
in New Zealand knows that that's not great for our country.
Speaker 2 (03:34):
Okay, I think you alluded in your speech to the
idea that potentially that zero point nine percent contraction could
be revised, presumably to something a bit smaller. What advice
have you had from Treasury around that.
Speaker 3 (03:47):
Yeah, just simply that they've pointed out to me that
over the past couple of years or so, it has
become very regular for Stats n Z to revise it's
quarterly GDP data, and you can look back on that
and see that some of those revisions have been reasonably significant.
To defend STATS that has actually occurred around the world
(04:08):
to some extent that getting back to seasonal patterns post
COVID and measuring that STATS data is challenging, and you've
seen a number of jurisdictions find that survey techniques are
having to evolve. So I don't think STATS in Z
is unusual in that sense, but we certainly have seen
significant revisions to the quarterly data. There are some technical
(04:28):
factors which I'm not even sure this audience would be
up for understanding, but to deal with the top down
adjustment and the seasonality of the Q two quarter versus
the Q four data, and Treasury of brief me on
those things and said, look, taken together, all you need
to know is don't be surprised if there is a
revision to this, and the Reserve Band clearly pointed to
that in their statement yesterday as well.
Speaker 2 (04:47):
Do you want to take a stab at what it
might be revised?
Speaker 3 (04:48):
No, I don't want to do that.
Speaker 2 (04:51):
You're saying now that the worst is behind us. I
just want to quickly touch on the NZIARS Business Business
survey that came out this week, because that was quite downbeat. Notably,
investment intentions were sharply lower, and that thirteen percent of
firms expecting to reduce spending on plant and machinery over
the coming year. And that must be a bit of
(05:11):
a concern, particularly after your investment boost in this year's budget.
Speaker 3 (05:15):
Yeah. Look, we've always said that investment boost is a
policy for the medium and long term. It's not a
stimulus response. We don't think the fiscal stimulus is required
from the government at this juncture. The Reserve Bank is
doing the lifting on stimulus, but it's actually about the
productivity settings, and so firms know it's there and are
(05:38):
going to be able to take it up. And on
the margin, we do expect it will bring some investment
decisions over the line that wouldn't have otherwise happened. You know,
the NZIR survey you refer to is interesting and that
it's not as exposed to agriculture as some of the
other surveys, and I think that is significant because we
are very much seeing that the agricultural part of the
economy is doing very well. That is where you are
(06:01):
seeing not only good returns, but certainly for the dairy sector,
they're looking ahead potentially to an additional dividend next year,
and you're seeing a sense that those returns will be
sustained across large parts of the agricultural sector with the
highest terms of trade we've had since the fifties, So
that means that you are seeing different things happening in
(06:21):
different parts of the economy. That survey isn't picking up
on the egg and I think if it was, it
would paint a more positive picture. Equally, the own activity
measures in that survey show that people's reported actual activity
is getting better.
Speaker 2 (06:34):
Okay, you mentioned stimulus there briefly. Of course, we do
have an election next year. You're going to want the
economy to be growing by then. Are you planning any
specific stimulus measures going into the next year.
Speaker 3 (06:46):
No, we're going to stick to our fiscal plan because
we were elected very clearly on a platform that after
some years of what we would characterize as very reckless
economic and fiscal management, which allowed debt to soar in
a way that was quite unprecedented and allowed a structural
(07:06):
deficit to be put in place, with spending reaching very
high levels in a wasteful way. That part of what
we were elected to do was re was reset those
foundations to have fiscal responsibility back, to get the books
back in balance, and so that's part of our handshake
with the New Zealand people. And to do that, we've
(07:27):
got to stick to the fiscal strategy and we're confident
that we can do that while continuing to invest in
the public services, which we've also committed to do a
better job on, whether that's in health or education, our police,
and we've demonstrated that we can do that. Over the
past two budgets by delivering forty three billion dollars of
savings from less efficient parts of the crown, we have
(07:50):
been able to then release investment to education, to health,
to other critical areas, and it will be the same
in next year's budget.
Speaker 2 (07:58):
Well, you are constrained by the fiscal situation. The budget
deficit is forecastill widened to twelve billion in the current year.
That's two point six percent of GDP. Do you still
expect to be able to return the budget to surplus
in twenty twenty.
Speaker 3 (08:12):
Eight, Yes, yes, we do. We continue to have that
intention that it continues to be our fiscal goal. How
that will actually play out will fluctuate over a series
of forecasts. But what we've set out in our budget
plan is a gradual consolidation path. And all of the
advice that I've received is, well, yeah, in a technical sense,
(08:36):
you could suddenly just rip a whole hecker spending out
and get yourself back into balance immediately. Actually, the way
that you would have to do that would probably be
through transfers, that is, social welfare support or superannuation support,
because that's where the bulk of adjustable spending lies, and
when you do that in one fowl swoop, that can
actually have extremely negative impacts on both economic growth and
(08:59):
economic center. Not to mention the fact we don't have
a mandate for that from the people who elected us,
so I don't think that would be the right thing
to do. And we have set out confidently that we
can achieve fiscal consolidation over the medium term consistent with
what the experts tell us as needed. And look, you know,
the best way of reviewing whether I'm telling the truth
(09:20):
there is the ratings agencies, and they retain confidence in
our plan. They think that this remains a good credit
risk of a country. They've rated us highly and say,
as long as we stick to that plan, we're all good.
Speaker 2 (09:31):
Of course, the ratings agency is also like you as
subprime debt. But let's move on to net debt.
Speaker 3 (09:38):
There's a cheery chat.
Speaker 2 (09:42):
I just want to briefly touch on debt. It's currently
about forty two percent of GDP. You want to reduce
it to less than forty percent. It's forecast increased to
forty six percent in the next couple of years. Those
are historically high numbers, and the Treasury is warning that
it'll keep rising, going to two hundred percent of GDP
by twenty sixty five, unless something's done to address the
(10:05):
pressures of the aging population. And I wonder what you
see as being necessary to stop that from happening.
Speaker 3 (10:12):
First, I just want to address a few things in
your question slash speech. The first of all, the debt
is forecast to grow and before it comes back down
at the end of the forecast period, before we bend
it down. But it is of note I think that
when we saw the full accounts for the year which
we published yesterday, we were forecasting and increased to debt,
(10:33):
but actually debt held level. My point here is, yes,
we're forecasting that, but we're always aiming to do better.
The second thing is you're absolutely right that Treasury have
said very clearly that anything above fifty percent debt in
New Zealand, due to our small, exposed nature and the
price we already pay for debt, would expose us if
(10:54):
we were to have any kind of a shock, and
would not be a prudent place to be. And we
accept their advice on that and think that it is
important to get back into a more prudent debt position
as we look ahead Treasury have done there. Forty years
from now, if nothing changes, if no government decides to
do anything differently, what might happen. And frankly, I just
(11:15):
think that's a theoretical exercise that has no bearing on reality,
because governments have proven that they do react to the
circumstances in front of them. You know a couple of
key issues for New Zealand superannuation and health, and those
are the two areas that are going to drive future
public expenditure. I think all parties have a requirement to
(11:40):
go into the next election with a policy setting out
where they're at on superannuation, because as we all know,
these are very long held things and we need to
signal very clearly, very much ahead of people who aren't
even thinking about retiring now, what those settings will look like.
We as a part have proposed changes in this area
(12:02):
in the past. We haven't committed to whether we would
make changes in the future, but I think we have
shown our hand at this recent budget by increasing those
contributions to key we savor, which shows a commitment I
think from all three parties in the coalition that that
is an important vehicle for New Zealand's future savings.
Speaker 2 (12:22):
What about new revenue streams. It's something which Treasury is
also highlighted. Do you see a need for any new
revenue streams?
Speaker 3 (12:29):
It was interesting. We recently had a tax expert visit
New Zealand and I had him come into my office
and I said, well, how do we look relative for
the rest of the world, And he said, like, you're
really good. You've got a really great system in that
you're a posed to child for having resisted the political
urge to fiddle with your GST. It's very clean. You
haven't introduced exemptions and problems like that. It works, is
(12:52):
a really efficient revenue system. Your paye system looks pretty good.
You've got the corporate system looking pretty good. It works
pretty well. It's a clean system, and so our viewers
when you look at when you look at the tech system,
you want it to be efficient. You don't want it
to seem distorting signals. You want it to raise sufficient revenue.
(13:15):
But we will always be looking at it to say
we'll given our goal is to be more competitive internationally,
Given our goal as for New Zealanders to get ahead
and to pursue aspiration and achievement, we should be continuously
asking ourselves. Could these settings better support that?
Speaker 1 (13:30):
We'll be right back for part two of New Zealand
Finance Minister Nicola Willis in conversation with Bloomberg's Matthew Brocket.
This is the Bloomberg Australia Podcast and welcome back to
the Bloomberg Australia Podcast. You're listening to an extract of
Wellington Bureau Chief Matthew Brockett in conversation with New Zealand
(13:52):
Finance Minister Nicola Willis, recorded before a live audience in
Auckland earlier this month.
Speaker 3 (13:58):
What about a capital gains text that's never been on
our agenda?
Speaker 2 (14:02):
But I mean, why not when New Zealand is an
outlier in the OECT and not having one.
Speaker 3 (14:08):
Well, the first reason why not is the parties that
want to raise a capital gains tax will also want
to waste the money on something else. And typically we've
seen that labor governments that have spent more have not
put that spending into productive investment. We've seen it in
fact been used in a wasteful way. But the second
(14:29):
reason is that capital gains taxes very clearly send a
message that those who invest in capital and gain from
capital will be punished for it, and we're sending a
really strong message we actually want more investment in New Zealand,
we actually want more capital growth to occur. And it's
very hard for me to reconcile how you say, on
the one hand, we're going to tax returns on capital,
(14:51):
but on the other hand, we really want you invest
in capital and making greater returns on capital. So it's
just not consistent with our worldview, which is, let's make
this a better place to vent best, not make it harder.
Speaker 2 (15:01):
Well, I'll just push back on that just a little bit.
I mean, there's no strong evidence that taxing capital gains
actually drives capital away. And I mean, if everyone else
has got a capital gains text, then where's it going
to go?
Speaker 3 (15:13):
And well, it gives them another reason to go. And
you know, I'm very reflective about this, which is we've
got this big brother over there called Australia, and we
have very free flows of people in capital between New
Zealand and Australia. And our advantages are not absolute. We
have many It's a much better place to live here.
(15:33):
But one of the things that does matter is things
like Australia has a capital tax, a capital gains regime
and we don't and on the margin, yes, that's of
advantage to us. Do we want to keep giving away
every single area of advantage that we have? My answer
is known.
Speaker 2 (15:49):
Okay, As we're on the housing market broadly, you know,
I just want to ask for your views on this
because it plays an important part in terms of economic
growth and the wealth effect, which we're currently not having
at the moment. Your colleague christ Bishop is on record
as saying he wants house prices to fall, and they
have been falling, but that makes your job harder. What
(16:11):
would you like to see in the housing market.
Speaker 3 (16:13):
Well, I want to see a much more moderate house
price growth than we have seen in the past. So
there's two issues. The first issue is that we saw
a massive spike in house prices in New Zealand post COVID,
essentially a thirty percent house price growth in one year.
And then we've basically seen an asset bubble crash, which
(16:36):
is that that's come off the other side, and of
course that's at a huge knock to household confidence and
has really been a kick in the guts for many
New Zealanders. So I think that has absolutely affected the
recovery that we're having what we want to see, and indeed,
what Treasury is forecasting is that in the future there
(16:58):
will be moderate house price growth, but in a system
that allows supply to respond to demand, because historically what
we've seen in New Zealand is periods of extremely high
house price growth simply because demand was higher for housing,
but the market was completely unable to respond on the
supply side. Why because our resource consent settings didn't allow
(17:22):
developers to get the consent for the developments they might
have wanted to do, so they could see the signal
in the market house prices are going up high. Let's
get in there and build some houses to respond to that.
But there was a huge timing delay between the markets
showing that and then being able to respond with supply.
So we're changing the settings. And what Chris Bishop is
intent on is you want for the market to work
(17:42):
so that if we are seeing spikes and demand, people
can get out and supply the housing. But both he
and I agree we're going to see moderate house price
growth in the future.
Speaker 2 (17:50):
Okay, let's move on to the Reserve Bank, which has
been dominating headlines this year for all kinds of reasons. Firstly,
do you think it made the policy mistake? I mean
it paused and its rat cuts earlier this year and
now it's cutting by fifty basis points. Did they fail
to recognize that the economy was in a hole?
Speaker 3 (18:08):
Well, I have the good grace not to comment on
whether or not they have succeeded or failed, and in
return they have the good grace to do the same
for me.
Speaker 2 (18:15):
Okay, you've appointed a new Reserve Bank Governor. Anna Breman,
currently Deputy governor of Sweden's Rix Bank, will be the
first woman to help in the RBNZ. Now, I know
you said that gender wasn't a consideration in that appointment,
but I wonder how important it was for you to
break that glass ceiling.
Speaker 3 (18:35):
Well, I think it's significant for New Zealand having been
appointed to a role where there's only been another woman previously.
I know that it's very undermining if people suggest that
the reason you're in that role is because of your gender,
and I did not want that for doctor Breman. At
(18:55):
the point of her appointment that was very important to me.
She is absolutely there on her merits. She has a
CV from Central Banking, Central Casting, and she's an extraordinarily
impressive person. But there is just no question when our daughters,
but actually when women across the country see that there
(19:17):
is no office in this country that cannot be occupied
by a woman that has a galvanizing and positive effect.
Speaker 2 (19:24):
In her initial remarks, Breeman spoke about enhancing transparency at
the RBNZ. The Ricks Bank is more progressive on that
front than our central Bank in terms of things like
attributing votes to members of the rate sitting committee, holding
a press conference after each rate decision, and so on.
I wonder if you see her appointment as an opportunity
(19:45):
to introduce transparence transparency reforms.
Speaker 3 (19:48):
Great question, and the answer is yes, yes, yes.
Speaker 2 (19:50):
Okay, what kind of reforms meant? Would we you, for example,
favor that votes being attributed on the Military Policy Committee?
Speaker 3 (19:59):
Well, look, I'm going to leave it until doctor Brahman
has actually formally commenced her role and is able to
have those discussions with her own board, and then I
will have those discussions with them about where we take that,
because obviously those are decisions that we will consider together.
But both me and doctor Braman independently have said that
we think central banks should be committed to public transparency
(20:23):
and accountability because it builds trust and that is actually
essential to the way in which central banks operate. And
where we have a choice in the settings that we
think ultimately will build trust and build accountability, then I
think we are duty bound to consider those changes. So
there are always trade offs and balances to be made,
(20:44):
and so all of these things need to be considered carefully.
But as you point out, there are monetary policy regimes
around the world which are radically more transparent than ours.
Ours is still at the transparent end of the spectrum,
but of course there's other improvements we could make.
Speaker 2 (20:58):
But just to be clear, would you support the attribution
of votes on the MPC.
Speaker 3 (21:04):
Well, as I say, I'm not going to make a
judgment on that until doctor Breman, together with her board,
have had an opportunity to consider it. But I do
think it's been very positive actually to have the record
of split votes over recent OCR decisions, because it just
informs the market better about what's happening. But I also
think it's healthy that you get the odd split decision
(21:25):
on the MPC because what it demonstrates is they are
having robust debates around that table and are seeing the
balance things. It's not group think, it's not one person
deciding and telling the others what to think. That there
is a range of views being shared and being brought
to the table. I think that is actually a healthy
thing and not to be feared.
Speaker 2 (21:43):
Since its formation in twenty nineteen, the MPC, we've seen
external members join that and they've been almost completely invisible.
I mean I can count on one hand the number
of times they've engaged publicly or with the media. Is
that acceptable? Do you think that there should be a
bit more accountability there? I mean, these are people designing
on interest rates that affect the whole country.
Speaker 3 (22:04):
Ah well, look, there's nothing to stop them from doing that.
There's nothing preventing them from doing that. And I think
the reality is that the that the MPC speaks via
its statements, and there's always some desire not to confuse
the market with people out saying different things in between updates,
(22:25):
so that probably bears on some of their approach to it.
But there's absolutely nothing to stop them right now, but.
Speaker 2 (22:31):
They're not doing it. Yeah yeah, okay, what about just
just finally, what about a press conference after each rate decision?
As the Rick's Bank does I mean, would that be
something that you would be in favor of.
Speaker 3 (22:42):
Look, as I say these are all, there's actually a
laundry list of ideas that doctor Brayman and the Board
may wish to consider. I don't think our system is broken.
I think it actually works fairly well. Those who are
market participants tell me that they feel they get good
and clear information out of the official cash rate decisions,
(23:03):
and so I don't think that it's not working. But
if there are incremental improvements we can make, and there
are many we could consider, then we should. And each
of those will come with some some pros and some
cons and we'll need to weigh that up. I'll have
a view, the Treasury will have a view, that the
RB and Z will have a view, and together will
weigh that up. And I'll respect that process by waiting
(23:24):
until the right time.
Speaker 1 (23:25):
Okay.
Speaker 2 (23:26):
Just this week we saw news that the former governor
was paid a restraint of trade payment of over four
hundred thousand dollars. I mean, it's looked a bit untidy,
this whole saga, and I just wonder whether you've felt
that it's undermined the reputation of the Reserve Bank in
any way.
Speaker 3 (23:43):
Well, look, ultimately the chairperson of the Reserve Bank did resign,
and I think that ultimately reflected his decision, but also
our discussion that we wanted to protect the reputation of
the Reserve Bank. And I've made absolutely no bones about
the fact that I don't think they had managed that
episode well and that they should have been much more
(24:06):
open and transparent in the way that they handled questions
seeking information about that matter. I always sought very properly,
I think, to not have the role as the commentator
in chief on the employment agreement between the Governor and
the Board. I thought it was very dangerous for the
Minister to step into that dispute in any way, and
(24:30):
absolutely distanced myself from it, and then thought, having not
been a party to it, I must rely on the
Board to communicate about it, because otherwise I am inferring
and making inference and commentary on something which I'm not
actually a party too, that has all of the information
with bearing and so what that requires for it to
work is for the Reserve Bank to then communicate openly
(24:51):
and transparently, and unfortunately they haven't always met that mark.
Speaker 2 (24:55):
Okay, we are getting close to the time for the
Q and A. But I just wanted to finish out
USh with just a little bit of a conversation about
what it's like to have your job. You know, a
lot of people look at parliament and politics and think
that would be the last job they'd want to do.
You were extremely long hours, you face a lot of criticism,
and you know, just this week we've seen people throwing
(25:16):
rocks through politicans windows. What why do you want to
be in politics?
Speaker 3 (25:22):
Because I genuinely want to serve and make a difference.
I am one of those New Zealanders who has been
fortunate enough to get a great education, to have a
great mom and dad, to have the opportunities this country provides,
and I want to make sure that more people get that.
(25:46):
I want to make the country better. And I've also
got four kids and their age nine through fifteen, and
I worry that if New Zealand sits back and none
of us stand up to make the changes that are needed,
none of us stand up to say, let's actually make
sure the government works, none of us stand up and
say we actually need to change some things and make
(26:06):
some reforms and do better, then all my kids will say, well,
New Zealand's going backwards. I'm going to go and live
in London or Beijing or Singapore, and I'd quite like
to have Christmas here into the future. So I feel well,
I've had everything I could possibly wish for out of
this country. The least I can do is put my
shoulder to the wheel and help make it better.
Speaker 2 (26:28):
Okay, I'm not going to ask you if you want
Christopher Luxon's job, but if in the future the opportunity
arose for you to lead your party and become Prime Minister,
would you consider it.
Speaker 3 (26:41):
I am one hundred percent focused on being a good
finance Minister, a good economic growth minister, and delivering the
Social Investment Framework that I came to Parliament with an
absolute passion for, which is a whole nother speech and
a whole other forum. By the way, could you host
that one? Because that is a fascinating area of reform
that I don't talk enough about. And so my plate
(27:02):
is full. And I always say to people who are
coming to me saying should I run for Parliament? I
normally say yes, but I also say, but be really
clear in your head, why are you coming? Because if
you are coming with a sense of personal ego E
I want this role, then chances are you going to
be disappointed because there's a lot of factors outside of
(27:24):
your control. But actually you should be thinking what is
the service I want to offer, what is the impact
I want to have, and then seek opportunities to make it.
The reality is in this role, I have extraordinary opportunities
every day to have impact and make a difference, So
I could want for no more. I mean, it's extraordinary,
So I'll do this job to the absolute best of
(27:46):
my abilities.
Speaker 1 (27:47):
If you found today's conversation insight well, be sure to
follow the Bloomberg Australia Podcast wherever you listen and check
for more reading on the biggest issues facing New Zealand,
including the latest reporting from Matthew Brockett and his team.
Complete recording of this live event at Bloomberg dot com.
This episode was produced by Paul Allen, and our special
(28:08):
thanks go out to Jordan Mole, Josephine Dylan and Awson Ostop.
I'm Rebecca Jones and I'll see you next week.
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